Monday, September 1, 2008

Investment in stocks, debentures and mutual funds grows by 51%

According to the Reserve Bank of India’s annual report, though net household savings in absolute term went up by 8.18 per cent to 5,26,033 crore in 2007-08, as a percentage of gross domestic product (GDP) it is estimated to have fallen by 50 basis points (100 basis points equals one per cent) to 11.2 per cent during 2007-08.

The reason: a robust growth of about 9 per cent boosting GDP during the year.Investments in shares, debentures and mutual funds have seen a healthy growth last year. It also highlighted growing investor preference for riskier but high-yielding investment instruments compared to bank deposits.

The report said that investments in stocks, debentures and mutual funds grew by nearly 51 per cent to Rs 77,073 crore during 2007-08. In terms of share in the household savings it constitutes 10.5 per cent against 6.6 per cent at the end of previous year.

“The flow of household investments into mutual funds and growth in number of accounts with the industry in 2007-08 reflects this trend,” said AP Kurian, chairman, Association of Mutual Funds of India (AMFI).

However, growth is marginal when pegged to GDP—1.6 per cent against 1.2 per cent in 200607.
This growth is also not phenomenal when compared to global standards. “In the US, mutual fund corpus size is equal to over 70 per cent of the US GDP,” Kurian added.

Among the other components of household financial assets, assets in cash and investments in insurance, provident and pension funds went up by 21 per cent and 1.72 per cent respectively. But deposits (including bank, nonbank and trade debt) fell by about Rs 10,000 crore to Rs 4,15,245 crore, while claims on government became negative at Rs 27,042, against a positive figure of Rs 40,627 for the previous year, the central bank’s report said.

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